Building Wealth With Commercial Property

There are more ways to build wealth than one can count. But one of the most common ways in the history of our country to do so has been through savvy (and sometimes lucky) investments in real estate. The goal of any investment is to produce a return, and as large a return as possible. One of the allures that attracts so many investors to commercial and investment real estate is its unique ability to produce a return in three separate ways. These different types of return on investment are cash flow, principal paydown, and appreciation.

Cash Flow

One of the main benefits of commercial and investment real estate is the cash flow produced by the asset. Cash flow in investment real estate is generated by the total amount of rent collected by the tenant or tenants occupying the real estate. Investors look for opportunities where this revenue is over and above all carrying costs for the property, including loan payments, property taxes, insurance, repairs, maintenance, and so on. Any revenue left over after these carrying costs are paid is the cash flow benefit to the investor. The investor’s goal is to maximize cash flow as much as possible by pushing rents to what the market can bear while at the same time keeping carrying costs as low as possible.

Principle Paydown

One of the great benefits of owning commercial and investment real estate is the ability to finance a portion, typically a major portion, of the property through a loan. This allows investors to use the power of leverage to their advantage. If the property you invest in is financed, each monthly payment made will be split between principal paydown and interest. Using the revenue from the rental payments by the property’s tenants to pay down this loan in part also goes towards paying down the principal balance on your loan. More simply, your tenant’s rental payments are paying for you to add equity into your investment!

Property Appreciation

You’ve probably heard the term that “real estate values always go up, never down” or some variation of this sentiment. As millions of people can tell you from recent experience following the financial market collapse of 2008, this is certainly not the case. However, that doesn’t mean that historically property values haven’t risen as a whole. While there isn’t a lot of reliable data to give a blanket historical appreciation figure for real estate like there is for other investment types like stocks and bonds, we do know that home prices have generally increased by around 3% annually over the past 100+ years, despite some periods of much higher fluctuation. It would probably be pretty safe to assume that this amount is probably somewhat close to the real estate market as a whole over the same period. As with any investment, real estate is no different in that investors are always looking to time the market by buying at a point in time to where the property will appreciate in value over time. Those investors who have been able to correctly time the market on this are the ones who have typically been able to make arbitrage profits and build substantial wealth from their real estate investments.

Conclusion

It’s important to build your own wealth. The returns on investment from investing in real estate make this very much possible. Whether maximizing cash flow, utilizing rents to pay of the principal while adding equity to your investment, or by simply letting your property’s value appreciate, you can build up your own wealth. Alex P. Williams and KW Commercial Real Estate has plenty of properties available to assist you in this. From retail, to multi-family, warehouse and everything in between. We are here to help you. Visit Us At GetPropVal.com

Published by Alex Williams

In the parable of Alex Williams he became a Theoretical Theorist at a early age. He states; I'm just a seeker but also a finder seeking to assist other seekers for what you seek is causing you to seek.
View all posts by Alex Williams

Post navigation

List Your Property!

In today’s uncertain market you need the assurance that everything that can be done to put your property in front of the most potential buyers or tenants will be done. Maximum exposure is created by marketing your property through multiple internet sites and portals including “My Florida Regional MLS”, and Loopnet. The Florida Gulfcoast Commercial Association of Realtors (FGCAR) Catylist portal is the premier commercial real estate site used by realtors in the Southeast. FGCAR is the “go to” website in Tampa Bay and syndicates to 18 national real estate sites. In addition, the Coastline Commercial Realty website features your listing with all the details and full-color photos.

Testimonials

Alex completed our property sale efficiently and effectively. -Jon Anderson
I was thinking of selling, called and got a great price for my multi-family. -Judy Smells
You won't find anyone who works smarter than Alex W. -Walter Sellers

If Not Now, Then When?

Contact us today and let us help you with whatever your real estate need may be whether it’s disposition, Landlord representation, investment analysis and valuation or Tenant representation- we take pride in serving Tampa Bay Commercial Property Owners.